Richard’s Events provides catering services, among other services. The company has adopted activity-based costing (ABC) for the catering services. The ABC system classifies activities into two groups based on the cost driver used: diners and events. Each event is limited to 25 guests and requires four people to serve and clean up. Richard’s Events offers two types of catered events—an informal, outside party and a formal, seated meal.

The cost accountant at Richard’s Events has developed the following cost-driver rates for the individual activities:

Per-event costs do not vary with the number of diners.

Required

a. Compute the cost of a 25-guest informal party.

b. Compute the cost of a 25-guest formal meal

c. How much should Richard’s Events charge for each diner for each type of event if the company is to cover its costs?

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Activities (and cost drivers) Advertising (events).. Planning (events)... Renting equipment (events, diners) Obtaining insurance (events). Serving (events)..... Preparing food (diners). Informal Party $120 per event 90 per event 60 per event, plus 12 per diner 240 per event 240 per event 24 per diner Formal Dinner $120 per event 150 per event 90 per event, plus 24 per diner 480 per event 360 per event 36 per diner